New Jersey’s auto dealer president says he’s a “fan” of Tesla and supports them but only if they come clean and play like the other OEM kids in the Garden State sandbox.

After reading this, one might wonder if Tesla is in over its depth, or being sold down river, or what else is left out of the story?

We saw a bunch of reports passing on news from the Mind of Tesla, but being an enterprising reporter, and given there’s this thing called a telephone, we used it, and lo and behold, got an earful.

Funny, Tesla did not mention what we heard when we contacted the governor’s office and auto dealer association – especially the latter, as you’ll see.

What’s next for Tesla? Will it pursue legal action? I’ve not seen anything definitive on that, but if anyone has info or insights, feel free to share.

Alternate title: Why New Jersey became the latest to say Tesla Schmesla.

Tesla Motors will be barred from selling its cars in New Jersey after April 1 following a decision Tuesday by the New Jersey Motor Vehicle Commission (NJMVC), and that’s no joke.

Nor was an 11th hour Tesla blog post attempting to rouse support Tuesday interpreted by New Jersey officials as funny. On the contrary, Jim Appleton, president of the New Jersey Coalition of Automotive Retailers (NJ CAR) in so many words said it was a pouting session by an influential lawbreaker used to getting its way.

In the post, Tesla did lash out saying it had been let down from “good faith” assurances by Gov. Chris Christie’s administration, and the NJMVC. It implied also it and NJ CAR had agreed to publicly discuss their differences.

But nothing could be further from the truth, said Appleton. Instead, he said, Tesla’s words smack of hypocrisy, self incrimination, and more. And if what Tesla wrote implicating the governor, NJMVC and legislature means as much as it implies, there might be trouble beyond Tesla being barred from doing business.

In its post, Tesla said it had been working with the governor’s general counsel on allowing it to keep receiving state auto dealer licenses – something New Jersey reaffirmed later in the day it has no right to receive.

Tesla accused Gov. Chris Christie’s administration of going back on its word, and acting beyond its authority. It also insinuated a conspiracy by Christie’s office and “a private interest group” – NJ CAR – in an unforeseen “attack” against Tesla as the governor and auto dealers sought to protect a “monopoly” at consumers’ expense.

Appleton, an attorney, in turn said it was “the pot calling the kettle black” to accuse anyone of backroom dealing. Appleton said he was amazed Tesla publicly admits it had even sought such agreements.

The dealings, he said, implied Tesla was lobbying behind the scenes to get the governor’s general counsel or someone with power to pressure or convince the NJMVC to turn a blind eye to laws already on the books.

“I mean, for them to publicly say that they’ve met with the governor’s chief counsel and they had an agreement to allow the motor vehicle commission to let Tesla operate in an open and notorious unlawful manner,” said Appleton. “I mean it’s mind boggling that they would put that in writing. I mean someone could go to jail for that.“

HybridCars.com did attempt to give Tesla equal opportunity to respond. Tesla initially invited our query and sent a general response by its business development VP to a boilerplate answer by Gov. Christie’s office.

Tesla did not reply however to statements made by Appleton, which we’ll publish below.

Later in the day, Tesla edited its blog post removing the names of Gov. Christies’ legal counsel with which it said it was dealing.

The edited post is still largely similar, but we have retained an original copy (below) upon which Appleton’s responses which follow are based.

At Issue

New Jersey is one of the country’s most affluent states and has a small but growing customer base which has bought fewer than 700 Model S sedans so far, with Model S and Model X customers also waiting now in queue.

The subject of Tesla’s blog post was PRN 2013-138, a proposal to state motor vehicle regulations under title NJSA 56. This proposal would add teeth to the way car dealer license applicants would be reviewed by the state. The intent of PRN 2013-138 was to reform the applicant review process so it will not let applicants slip past already existing New Jersey law.

Approval by the governor and NJMVC – not to mention moral support by NJ CAR – is thus for upholding existing legislation, not new legislation. It effectively means New Jersey will fully enforce the law whereas before it had not. It also means Tesla’s existing dealership licenses will likely not be renewed, and it would not get any new ones.

Tesla put things differently, however in its opening sentence:

Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.

Unfortunately, Monday we received news that Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature. The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey.

In response to Tesla’s alleging Gov. Christie’s office had some sort of informal word-of-mouth deal in the making, its press officer Kevin Roberts replied this was not the case.

“Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law,” said Roberts. “This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning.”

The response by Tesla’s VP of Business Development, Diarmuid O’Connell, reiterated it had an agreement with the governor.

The statute in New Jersey plainly allows Tesla to be licensed to sell cars there. Indeed, the Motor Vehicle Commission has licensed Tesla under that statute ever since October 2012, and any suggestion that Tesla was told “since the beginning” about any problem with its ability to be licensed there is false. The only thing that has changed is the Christie Administration’s sudden decision to go around the Legislature in an attempt to enact a rule that the statute doesn’t permit. Worse, it has done so without any reasonable notice or even a public hearing.

Appleton in turn said New Jersey’s decisions should have been upheld. He said the existing regulations under New Jersey’s motor vehicle code title 56 are very specifically worded to forbid automakers from owning and qualifying as a legal franchise.

“Clearly they are not a franchisee and because they’re not a franchisee they don’t comply with title 56, and because they don’t comply with title 56, and these regulations are intended to conform the licensing process that MVC follows to title 56,” said Appleton of Tesla, and the pending proposal PRN 2013-138. “Once it’s done they will have to take a look at Tesla upon renewal of their license to determine whether or not they are qualified to be a licensee in New Jersey, and I assure you that they are not. And they’re proud of it.”

Some news reports, and some fans commenting on the Tesla forum are largely portraying Tesla’s point of view, which it wrote above and continued, as follows:

This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market.

Sympathy followed in Tesla’s forum as well:

jtodtman@gmail.com | MARCH 11, 2014
It seems that NADA and its state affiliates are taking a page from Big Tobacco’s playbook . . . lawyer the opposition to death.

logicalthinker | MARCH 11, 2014
Oh my word. How dirty do politicians get?
In a similar vein, Christie had nothing to do with the bridge scandal, of course.
Tesla is far from sure success in this battle to be able to sell its cars. Every Tesla owner in NJ has a personal emergency today and should take a sick day to go rally for BASIC American values at
NEW JERSEY MOTOR VEHICLE COMMISSION ANNUAL REORGANIZATION MEETING OF THE BOARD MEMBERS Commission Headquarters, 8th Floor East Wing 225 East State Street, Trenton, New Jersey
2:00 p.m., Tuesday, March 11, 2014

mrbarnes | MARCH 11, 2014
Unbelievable. Except, as a NJ resident, I remember this occurring when they increased the tolls on the roads, NJ transit fare increases – they left little to no public comment, and if so – it was a 1 day in advance notice at a location that would be very difficult to get to.

The NADA and NJ CAR (dealers association) must have donated heavily in Christie’s re-election, and therefore are now hoping to be repaid.

I will be contacting my assembly persons and state senator; please call yours (or any if you are from out of state): http://www.njleg.state.nj.us/members/abcroster.asp http://www.njleg.state.nj.us/members/legsearch.asp

Many more points are made on the Tesla forum and elsewhere, but in defense of the franchise system, Appleton said it was not an attack against Tesla no matter how Tesla spins it. Instead, said Appleton, it is in the interest of the consumer and public safety.

And it’s been seen as a safeguard against automakers.

A real fear expressed by other state auto dealer associations is against self-interested automakers who could ride in on precedents carved out by Tesla.

Points along this line of reasoning were aired last year by Texas state auto dealer association president, Bill Wolters.

Tesla has said at other times it sees itself in the the moral right, and explained its core rationale in Tuesday’s post:

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

Tesla is also banned in Arizona and Texas, and faces opposition elsewhere. But while auto dealer associations express various concerns, for his part, Appleton emphasized the public safety and free market angle.

Tesla alleged collusion in New Jersey against free trade, but Appleton countered this view.

“We believe that the franchise system of automotive retailers is a system that works well to support the public and consumer interest in motor vehicles,” said Appleton. “Specifically it promotes price competition, and it encourages full and fair compliance with warranty and safety recall service.

“When an automaker sees a warranty or safety recall claim, they see expense. And if you doubt it, look at what General Motors has done with respect to the current recall that’s going on and how long it took them, how many lives it took before General Motors recognized there was a problem.

“When an automotive retailer, an independent automotive retailer sees there is a warranty or safety recall claim, they see opportunity and revenue and that’s why the legislature in its infinite wisdom in New Jersey and many other states has dictated,” he continued,

“You can’t put the fox in charge of the chicken coop. And automakers are not permitted to directly retail or own motor vehicle dealerships in the state. OK? So that’s the state of the law in New Jersey; has been for decades.”

Appleton said he was dismayed by Tesla’s audacity and that it ever got a license against the law which he says is “black and white,” not gray.

“Tesla comes along a year and a half ago. I assumed they have lawyers,” said Appleton. “I assumed they could read. Notwithstanding the fact that New Jersey prohibits an automaker from owning or directly retailing cars, they apply for motor vehicle licenses and much to everyone’s surprise, after the fact, they got them.

“When that fact became evident and Tesla began to openly and notoriously conduct business in an unlawful manner in the state of New Jersey, people took notice. And the motor vehicle commission was advised that they had screwed up. They looked at it, their lawyers looked at it, and sure enough they came to the conclusion that they screwed up.”

It was last October that PRN 2013-138 was proposed and at that time Tesla and NJ CAR filed comments which Appleton said were considered by the NJMVC.

“The summary of the public comments indicate that the motor vehicle commission recognized that they goofed, and that the Tesla arguments – while they might be arguments that could be made to the legislature or a court of law – are not arguments that go to the question of whether or not the motor vehicle commission can or indeed must adopt a regulation which conforms their licensing process to state law,” said Appleton, “And that’s what they are deciding today.”

Ironically, Appleton noted, while Tesla accuses the governor, and NJ CAR as trying to protect a “monopoly,” it is Tesla that would be viewed as attempting to establish a monopoly in its own right with factory control of the sales, distribution, and service.

New Jersey’s title 56 regulations, while periodically amended Appleton said, have stood substantially and been upheld intact for decades.

“The regulators have consistently gone back and looked at it for good reason,” he said. “The public policy which is supported here is to promote competition and ensure full and fair compliance with warranty and safety recall service dictates that an independent network of motor vehicle franchisees is preferable to a monopoly system such as the one which Tesla advocates.”

Appleton also answered implications that NJ CAR was in on some form of agreement, as Tesla wrote of PRN 2013-138 in its original blog post before editing out their names.

This move comes in spite of discussions with the Governor’s departing Chief Counsel Charlie McKenna and incoming Chief Counsel Chris Porrino as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature.

To this implication, Appleton said the only interaction he ever had was with a Trenton lobbyist he was friends with that Tesla hired. He said they met at the state house, chuckled that they were on opposite sides, and that was the end of the discussion. Since then, he’s had no professional contact with Tesla, he said.

“I’ve never met anyone from Tesla. Let me just say again. I think Tesla is a great product, I just think they’ve chosen an unwise and illegal distribution method in New Jersey,” said Appleton. “And I look forward to the day when Tesla wakes up and realizes that if they’re going to be a real car company selling any significant number of cars in the market they’re going to need franchisees, and that’s what’s sort of silly about this whole thing. It’s just a lot of circus but it’s not very productive. I guaranty you that if Tesla goes down market and has a $40,000 car which they claim they’re going to have in the market soon – and I don’t know if that’s to pump up stock value or if that’s a real statement – but if that’s for real, then how are they going to sell enough of those $40,000 cars without dealers? Without service facilities in the neighborhoods, and God forbid there should be a serious recall like the Toyota unintended acceleration or the current GM recall.”

We asked Appleton about Tesla’s allegation that conspiracy and backroom deals may have been at play when it wrote the governor and NJMVC were working “at the behest of a special interest group.”

“It’s the kettle calling the pot black. This is a group that’s used to getting their way,” said Appleton. “Their internet billionaire, you know, who’s used to throwing his money and weight around and is frustrated, and they thought that they had an agreement in the governor’s office to turn a blind eye to the law and to allow this company to operate outside the law. And I can assure you that nobody in the governor’s office was going to agree to allow them to.”

Tesla has three choices in Appleton’s view:

1) Conform its business model to New Jersey state law.

“I believe they’ll do that sooner or later, and I would prefer sooner rather than later because this legal and regulator stuff is a sideshow,” he said.

2) Conform the law to its business model by sponsoring legislation. (Thus far there’s been none. In Texas Tesla tried that, but it was defeated.)

3) “Go to court and challenge regulations as unlawful or unconstitutional or oppressive or unfair, arbitrary, capricious. I’m a lawyer I can tell you there a hundred different ways they can challenge the law,” said Appleton. “None of them is going to do them much good” because the law is there to promote competition and “ensure that consumers get the full and fair treatment when it comes to warranty and safety recall service.”

“What Tesla is saying is we got by the motor vehicle commission once, and we think we should be able to get by them forever, even though our business model is unlawful under current law,” said Appleton. “And what the motor vehicle commission is saying is we’ve screwed up. We’re changing our procedures so that they conform with the longstanding existing law. And once we conform our procedures to the longstanding existing law, Tesla is at risk of losing its license.”

We asked how Appleton viewed Tesla saying the governor and NJMVC went against their “authority” in supporting proposal.

Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers.

“It’s just the opposite. They’re [governor and NJMVC] honoring the requirements of the legislature, and sticking to their authority to enforce the current statute,” said Appleton. “There is no bill pending before the legislature right now that I’m aware of that would allow Tesla to operate in the way they’re currently operating and the law has been in New Jersey for decades, as I stated.

“What are they saying? Is there backroom deals now with the legislature too?” said Appleton, asking rhetorically.

So, we asked, how did the NJMVC originally make an error in allowing Tesla a license?

“Title 56 is not enforced or administered by the motor vehicle commission and as a result I think they didn’t really understand,” Appleton said conjecturing. “And frankly nobody ever asked, you know? There were no automakers coming to the state without [qualified] franchisees. So they never looked at title 56 as a precondition for licensing notwithstanding the fact the statue required it. So that’s the good faith mistake.

“The other option which now that I see that they claim they’ve been involved in all kinds of backroom dealing with the administration is somebody agreed that they turn a blind eye to the regulations and go ahead and issue the licenses and see if there were problems. And if there were problems they would agree not to enforce the law. Now I don’t believe that to be true, but looking at the Tesla statement, I’ve got to rethink that.”

HC

Original blog post:

Defending Innovation and Consumer Choice in New Jersey
By The Tesla Motors Team

Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.

Unfortunately, Monday we received news that Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature. The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey. This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market.

Proposal PRN 2013-138 seeks to impose stringent licensing rules that would, among other things, require all new motor vehicles to be sold through middlemen and block Tesla’s direct sales model. This move comes in spite of discussions with the Governor’s departing Chief Counsel Charlie McKenna and incoming Chief Counsel Chris Porrino as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature. Instead, rather than engage in an open debate on such a significant policy issue, the Administration has expedited the implementation of a new law that the Commission intends to stealthily approve at a meeting in Trenton today at 2:00 PM EDT.

We are disappointed in the actions of the NJMVC and the Christie Administration, which come on the heels of more than nine months of unexplained delays in the issuing of a new sales license for Tesla, despite our numerous requests, calls, and letters. In addition, the NJMVC has also delayed the annual renewal of Tesla’s current dealer licenses without indication of the cause of the delay. The delays have handicapped Tesla in New Jersey, where, without clear licensing procedures and fair enforcement of existing law, we have been forced to delay our growth plans. This is an issue that affects not just Tesla customers, but also New Jersey citizens at large, because Tesla would be unable to create new jobs or participate in New Jersey’s economic revival.

At the same time, neither Tesla nor the taxpayers of New Jersey have been able to participate in any of the analysis or proposed rulemaking. Despite being the subject of the regulation, we were only able to obtain information about Tuesday’s meeting since we became aware of the proposed rules Wednesday.

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

We urge the Christie administration to act in good faith and withdraw the proposed amendment, or amend it so that it reflects the true intent of the Legislature and the people of New Jersey.

This entry was posted on Thursday, March 13th, 2014 at 5:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

COMMENTS: 86

1

+18

KUD Says

Mar 13th, 2014 (7:07 am)

There are a lot of arguments on both sides, but Tesla’s point is made every time you try and fill up with E-trons at a dealer of a different make. I even saw a Nissan dealer refuse to let a Leaf charge because it was bought at a different Nissan dealer (Plug Share activity). Then take dealers steering potential buyers away from EV’s because they take to long to sell. Seems to me Tesla has a point. And so far, I haven’t heard any complaints about Tesla Customer Service.

2

+12

Loboc Says

Mar 13th, 2014 (8:23 am)

Try taking your car to a different dealer than the one where it was purchased. The protected franchise model is broken. GM dealers act in their interest not GM’s or the customer’s.

3

+9

Schmeltz Says

Mar 13th, 2014 (8:43 am)

I don’t know where you get the energy to write that much Jeff. My fingers would be raw from typing that much. Well done as usual.

As for the topic at hand, stuff like this makes my head spin. I’ve said before and still stand by it…is this fight that Tesla is in worth it? That’s the bottom line to me. I see the Tesla viewpoint, but when you have to expend so much time, energy, and resources, is it worth it? So much inertia to overcome and for what? What would the harm be in a standalone, franchised dealership that sells exclusively Tesla cars (no other brands, no other ICE cars, just Teslas)? Not a Joe Schmoe Tesla/Mazda/VW dealer. Just a standalone Tesla dealership with sales people and service tech’s, etc. Now someone’s going to say, “Well they can’t make money that way”. Then that’s a big problem if it’s true, (and I don’t think it is). It sort of seems like Elon wants to make this a fight over principle, and again I see his point and I’m sympathetic. But for a company tight on resources to begin with, why fight battles that you are doubtful to win anyhow? Just make great cars and be done with it.

4

Raymondjram Says

Mar 13th, 2014 (8:47 am)

Why doesn’t tesla Motors establish a partnership with another automobile business that isn’t a car dealer? I suggested before that they work with a small tire shop, where the customer buys a full set of tires, and adds a Model S as an “accessory”. The vehicle arrives with cheap rolling tires, gets the new customer tires installed, and the car rolls out as a purchased vehicle ready to get a registration and plates.

And have they checked if the customer can buy the Model S out of state then relocate it in New Jersey? I believe there are other ways to buy a vehicle, have it brought in and registered in the state. Here we allow vehicles brought in from the mainland to get registered and install a new license plate (we only use the rear plate). So a similar method should be found for New jersey.

“OK? So that’s the state of the law in New Jersey; has been for decades”
————-

I’m tired of this response. Just because it’s been messed up for decades, doesn’t mean it needs to continue that way. Rather than get into the minutia of what the law specifically states, why not have an open discussion about how the people actually feel about the laws? Does anyone actually feel “protected” by dealers from evil car companies? Who protects me from evil Apple when I buy an iPod from them? How does dealers putting a markup on cars = more competition / better prices for consumers?

We need to openly discuss the laws on the books and have them reflect what the people want, not what specific businesses want. I have yet to hear an argument to make a special case for cars vs. any other consumer product out there.

Schmeltz: What would the harm be in a standalone, franchised dealership that sells exclusively Tesla cars (no other brands, no other ICE cars, just Teslas)?

And I’m trying to figure out why the Tesla stores aren’t already considered that. Is it because they are owned by the parent company? Do they need to have someone else claim to be the owner of that store? Could it be that simple, or would the books get screwy? What are the requirements to be considered a “Franchise”?

your question is “is this fight that Tesla is in worth it?”. I say yes, it is because of the customer needs to buy a large electric sedan that isn’t offered by any other American manufacturer, and it is a fight against old capitalistic protection schemes, where someone gets a part of the profit of this arrangement (maybe it is the dealer association or even members of the state government). Free enterprise means that you don’t have to be a member of a specific group to do business. We cannot accept laws that only protect the filthy rich and powerful, and keep out the innovations of a new business to establish sales that compete against the older ones.

I cannot buy Tesla, or any GM EVs , but I hope GM is not involved with this bad practice to protect their sales. I expect Tesla Motors get to keep their showrooms in New Jersey and sell their vehicles peacefully!

Raymond

11

+11

Nelson Says

Mar 13th, 2014 (9:06 am)

“laws already on the books.”

“…..is thus for upholding existing legislation, not new legislation.”

“Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law,” said Roberts. “This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning.”

The above quotes really get to the root of the problem. We live in the 21st century, in a time were worldwide communication is instantaneous and possible via the internet, TV and cell phone. As time has passed some great laws have been established to protect the general public. Most of the laws we live by still helps us today, but some of these laws only made sense when they were passed and do not in the 21st Century. It is the responsibility of our elected and appointed officials to review laws and make changes that benefit the majority of its constituents.

It’s a dark day in U.S. History when a law is enacted that prohibits a citizen from purchasing a product, which causes no physical harm to that person or others, due to its method of distribution. Such Laws go against the principles of our founding fathers who valued FREEDOM above all.http://www.landofthebrave.info/tea-act.htm

NPNS! SBF!
Volt#671

12

+17

Mark Z Says

Mar 13th, 2014 (9:12 am)

I’ll just repeat what I posted at HybridCars.com and add: thanks Jeff for your detailed report.

The New Jersey government is attempting to prevent competition by restricting Tesla Motors from selling vehicles from a mall store. The fact that Model S is the number one vehicle for quality and customer satisfaction has the dealers running scared. Instead of improving their sales and service, they turn to government control and interference. The traditional car dealers and organizations want to shut down the new superior service leader.

What other car company would replace an entire motor drive unit because of a bit of noise? Every issue, minor or major has been taken care of quickly and with excellent results. My Model S runs better today than when new. I cannot say that about any of the other ten cars I have owned. This level of satisfaction and service will continue despite of what state government influence will do to shut it down.

I say to Tesla Motors, “Build the 1000 square foot showroom and attached service center in the finest mall parking lots. Have test rides from the mall entrance to the show room. Do what ever it takes to change the minds of car buyers so that traditional car dealers will be forced to change their ways.”

Above all, may the American citizen be wary of voting for any politician that gets in the way of the free enterprise system and the freedom to buy a car in the mall. The success of this better way of doing business will not die. Mall food courts are allowed to operate despite local franchise competition. God forbid that the food courts must be shut down because the nearby food franchise does not want competition! Citizens must stop this nonsense by voting out of office those who stifle the freedom of a company that has a superior way of doing business. The near perfect ratings from Consumer Reports proves that this new way of doing business works perfectly well. May the consumer win the right to purchase Tesla Motors American manufactured Model S electric vehicles in the Tesla Store.

—–“We believe that the franchise system of automotive retailers is a system that works well to support the public and consumer interest in motor vehicles,” said Appleton. “Specifically it promotes price competition, and it encourages full and fair compliance with warranty and safety recall service. “When an automaker sees a warranty or safety recall claim, they see expense. And if you doubt it, look at what General Motors has done with respect to the current recall that’s going on and how long it took them, how many lives it took before General Motors recognized there was a problem. “When an automotive retailer, an independent automotive retailer sees there is a warranty or safety recall claim, they see opportunity and revenue and that’s why the legislature in its infinite wisdom in New Jersey and many other states has dictated,” he continued,”—–

I don’t agree with this argument. Tesla has been overly responsive to any issues from the start, even providing software downloads to fix problems. Also, my Ford dealer was VERY VERY hesitant to do work on my car because the TSB Bulletin I needed installed did not correspond word for word with my problem. “Who’s going to pay for it?” was their concern, citing if the TSB/software update would work at all. Well, they finally agreed to install it, and it did work. But I had to drop the car off a second time which was totally unnecessary.

14

+9

taser54 Says

Mar 13th, 2014 (9:36 am)

Don’t like the law? Lobby the legislature to change it. That’s the path, not arranging a backroom deal to ignore enforcement a law.

I really don’t know the answer to that, but that is a good question. At my local mall there is a space rented out by a local Hyundai/Kia dealer who simply parks the new cars in it with brochures for anyone to take. A person is available to answer any questions and will point you to the local dealer if you want to get a test drive or actually buy the car. It is just a show room. Nothing more. That is kind of what these Tesla stores are too. You actually buy the car somewhere else. I think Musk has a neat sales concept for his cars, though if he would ask me, I would tell him to fight the fight when you are bigger. They have so many irons in the fire now as it is. I mean, Gigafactory, next gen Model E development, battery development, Model X rollout, not to mention a little thing called Space X. The dealership issue is a fight that can be fought another day.

I agree, and I think it is a fight over principle, but is it wise to strain to go against the grain? The scrappy little dog shouldn’t be picking fights with the big dog, (because the little dog will get his clock cleaned). I personally want Tesla to live to see another day. Wasting time and resources may look noble now, but foolish when they’re standing at the doors of the bankruptcy court.

pdt: I have yet to hear a convincing argument why Apple should be allowed to sell directly to consumers, but not Tesla.

LOL, comments crossed, but I essentially said the same thing. Where’s their data showing direct sales of vehicles screwing over consumers? Is this there one data point: “And if you doubt it, look at what General Motors has done with respect to the current recall that’s going on and how long it took them, how many lives it took before General Motors recognized there was a problem.” Can they show me where dealers lobbied on behalf of the consumers, or was it just in their own interest of getting paid for warranty work? If it’s the dealer’s responsibility to protect the consumers, then the fact that “many lives” were lost is a black eye on them. Why didn’t they protect the consumer? Was the warranty fix not enough $ for them to be interested? Is this the only benefit the dealer provides? Don’t we already have laws that protect consumers? What really is the function of the dealer?

Schmeltz: Wasting time and resources may look noble now, but foolish when they’re standing at the doors of the bankruptcy court.

Unless they can get enough attention and appeal to the Supreme Court. It would be a landmark case. (and i’m sure lots of $ would be flying all over the place)

19

-1

ronr64 Says

Mar 13th, 2014 (10:16 am)

I am a big fan of Tesla. But I am a bigger fan of the “rule of law”. There is a lot of history behind our franchise laws. The word “history” implies old and perhaps out of date. But that is an opinion, one that many including myself hold. But none the less you don’t break the law because it is old and out dated or because you don’t agree with it. Tesla needs to work state by state to change these laws, get legislated exemptions, or create their own franchise dealerships that satisfy the current laws. They will have to have a state by state effort. It sucks but their alternative is to give up and go the traditional route with the pit falls that they have clearly stated is why they don’t want to use dealerships.

In the meantime those who want to buy a Tesla in a state that wont allow them to sell will just have to plan a trip to buy their car. That wont be too big a problem right now but will be a hindrance to Tesla being more mainstream.

If you want a more comprehensive argument that hits many more points than Appleton made, look at the Texas ADA president’s (Wolters) arguments in that story also linked.

It’s pretty clear people have a lot of problems and distrust of the present franchise system, and not without cause.

Tesla wants to set a new precedent that involves motor vehicles that authorities see as posing a greater public risk than a malfunctioning iPhone. Also the whole case for how franchise laws help support and economic safety net and myriad other fine points are made by Texas.

Bottom line: Tesla proposes a future that cannot be known until we “experience” it. Dealers are seriously concerned that this is a slippery slope, and that is why they are all fired up, based on their experience and insights being in the business.

Here’s a summary of just some of Texas far-more articulate arguments:

Auto dealers say they see problems. They do distrust the OEMs which must keep small businesses in place if they meet requirements. Small independent dealers do benefit their communities and give back. They may exist in and keep alive podunk towns that Tesla would never bother going to.

Look where the Japanese set up shop when not required to open up in teeny towns.

Factory direct does not guaranty savings are passed onto the customer. Tesla keeps pushing for new levels of profits.

Competition between competing independents has historically driven down profit margins, which the consumer benefits from.

A Tesla store will never compete against another Tesla store.
###

That said, there are potential problems with BOTH models — Tesla’s and the present franchise system.

Auto dealers trust Tesla about as far as they can throw them.

They want checks and balances rather than turning ultimate control over to the OEM.

Is it protectionist? Yes, but that is not their sole rationale.

The tendency in the public is to oversimplify the issues.

They know they don’t like auto dealers. They do know they like Tesla. End of story, in some cases.

It’s a sticky wicket and I would not pretend to say I have the ultimate answer, but I know better than to oversimplify.

ronr64: In the meantime those who want to buy a Tesla in a state that wont allow them to sell will just have to plan a trip to buy their car. That wont be too big a problem right now but will be a hindrance to Tesla being more mainstream.

It also screws over the consumers on the EV sales tax credit in New Jersey. 7% on $100K = $7,000. Might as well kiss the $7,500 from the Fed goodbye.

22

+10

DonC Says

Mar 13th, 2014 (10:47 am)

This is pure unadulterated horse manure. I am not a fan of Tesla and my opinion is that Elon Musk is a psychopath. So what? A manufacturer should be able to sell its own products directly. Many do. Apple does it. Ever been to an Apple store? How about New Balance? Patagonia? I could go on and on. Being able to sell your own products directly allows you to control the buying experience and the marketing of the product.

What is the advantage for a manufacture? Think about it. When you go to a Tesla store the salespeople are knowledgeable about the car but they’re NOT on commission and have no direct financial incentive to sell you any special vehicle. They give you lots of good information and a nice test drive. How about when you go to a Chevy dealer to look at a Volt? You’re likely to get some brain dead salesperson who knows zip about the Volt and wants to sell you a Cruze. Seriously. For a manufacturer with a different product, being able to sell directly would be a huge benefit to both it and to its customers.

The idea that a manufacturer selling direct hurts consumers is ridiculous. That’s so clear. Does anyone really think an Apple or Patagonia or New Balance store is a terrible thing? How are these things any different? If you believe in capitalism and free markets then the choice is clear: This law and its interpretation are abominations.

You could write a hundred thousand words but it’s unnecessary. This is just a bunch of business people paying off politicians so they don’t have to compete in a free market. While the car dealers have influence with politicians from both parties, the Republicans get a special shout out for always getting the economics wrong. When for various reasons free markets won’t work, they’re forever holding them out as ideal and always advocating for them. (Think GM bankruptcy). When they will work they don’t want them. Go figure how a party could get this so consistently wrong.

As for statements from Chris Christie’s office denying any political motivation, what a joke. Didn’t he make the same claim with respect to the lane closings in Fort Lee? Now it turns out that even pieces of the World Trade Center were just so much political graft in his hands. The man is wholly without principle, and everything he does is political retribution or payoff.

23

+7

DonC Says

Mar 13th, 2014 (10:55 am)

Jeff Cobb: Tesla wants to set a new precedent that involves motor vehicles that authorities see as posing a greater public risk than a malfunctioning iPhone.

That’s a canard that no thinking person would buy. The safety standards are all federal. What safety standard would a Model S not comply with? Simple. There isn’t one.

Jeff Cobb: Dealers are seriously concerned that this is a slippery slope, and that is why they are all fired up, based on their experience and insights being in the business.

You can’t possibly believe this. Dealers are all fired up because they see a threat to their government created and protected monopolies. They don’t give a rodent about consumers.

Thanks for the links. Later, when i’m not swamped here at the office, I will try to decipher some of the legal mumbo-jumbo.

Jeff Cobb: Tesla wants to set a new precedent that involves motor vehicles that authorities see as posing a greater public risk than a malfunctioning iPhone.

There are a lot of inherently dangerous products sold directly by manufacturers. I see this as just fear-mongering by the ADA. The auto-industry is one of the most regulated industries.

Jeff Cobb: Small independent dealers do benefit their communities and give back. They may exist in and keep alive podunk towns that Tesla would never bother going to.

I don’t buy this one either. It’s basically just charity, with most of the charity goes toward the middle-man. Should small towns complain when they don’t have a Walmart? Isn’t this supposed to be a free market, open shop where you want? There’s nothing stopping GM from indirectly shutting down po-dunk dealers if they really wanted to, but it seems like the tail is wagging the dog in this case. For example in the Volt’s situation. GM has a product it want’s its dealers to sell, but dealers can refuse saying they don’t want to spend $ for the training/equipment. This isn’t right IMO.

Regarding service, do not most po-dunk towns still have car shops to do service work, that are not affiliated with a dealership? I don’t see the need to have the sales office in that town, and force OEMs to keep that sales office open, even at their net loss. If the ADA feels service is an issue, then force OEMs to have service shops, not sales offices. Customers will be aware of what service shops are available in their area and use that info when making a purchasing decision. (talk to Raymond in Puerto Rico)

Jeff Cobb: Factory direct does not guaranty savings are passed onto the customer.

But it does prevent consumers from being charged over MSRP. Overall market competition puts the pressure on the MSRP.

Jeff Cobb: Is it protectionist? Yes, but that is not their sole rationale.

I really think they have no desire to help out their fellow man. This is purely in self-interest. Sorry, that’s just how I feel.

I agree. That’s why I think all of these things need to be talked about a lot more in the public, where a case can be made for each issue at length/in detail. Right now party-politics seems to be muddying up the waters, but I don’t really see this as a political party issue, more of a special interest getting their way by contributing to the political system in general.

Like a scientist, I would love to be proven wrong, but I just haven’t seen any data from the ADA yet to convince me. Hopefully the more press, the more attention/discussion, we can finally get a resolution to this topic.

25

+3

DonC Says

Mar 13th, 2014 (11:19 am)

There are BTW separate questions here. The car dealers want to conflate them but for analytic purposes they are separate.

The first question is whether, if a manufacturer chooses to have franchises, is the franchisee entitled to legal protections? That’s a simple question with an obvious “Yes” answer. It’s the one the car dealers talk about but it’s not involved here.

The second question is whether a manufacturer must use franchises? That’s an easy question from an analytic standpoint. Obviously consumers benefit if manufacturers have choice.

A third question is whether a manufacturer which chooses to have franchises should be forbidden from owning a franchise? Car dealers have managed to use political influence to prevent this in the car business but AFAIK no other industry does it this way, to no ill effect. Food poses more danger to health and safety than a car, but that hasn’t persuaded state lawmakers to prohibit McDonald’s (or Burger King etc.) from owning franchises. The “mixed” model is fairly prevalent and there is no evidence whatsoever that it poses a risk to consumers.

kdawg: Thanks for the links. Later, when i’m not swamped here at the office, I will try to decipher some of the legal mumbo-jumbo.

Actually that’s just the comments between Tesla and Appleton when they argued this in October.

But you can look up the specific codes if you wish. The bottom line is pretty clear. New Jersey unanimously upheld the rule that Tesla’s business model is illegal under state law.

kdawg: Like a scientist, I would love to be proven wrong, but I just haven’t seen any data from the ADA yet to convince me. Hopefully the more press, the more attention/discussion, we can finally get a resolution to this topic.

If you really want, you might try and contact Wolters and talk to him further.

Personally, I must not take sides.

I am able to see merit to both sides.

The bottom line is assertions about a future cannot be proven in the present. It boils down to how you view things, innate sensibility, and such.

One starts out with a hypothesis based on how one feels. This you are doing.

This is the common denominator in all arguments that rest their case also on ideology and philosophy. We could get out the pots of coffee and discus this day and night.

It’s about a future. Is it fear mongering, or fear based on what auto dealers truly feel in their gut?

You can allege self-serving motives are at their core, but can it be proven no other arguments hold water?

Is there not also self-serving in Tesla’s motives, or do we believe it is purely altruistic?

There is always a “what’s in it for me” factor in any business model.

Is Tesla’s the more noble model? This is the implication, and this is in question.

A scientist does not elevate a hypothesis to conclusion status until he has proof.

Jeff Cobb: One starts out with a hypothesis based on how one feels. This you are doing.

But it’s not a baseless hypothesis. Every other industry operates in a direct from OEM sales model, or mixed model, without repercussions. There is data here that would support this hypothesis.

Jeff Cobb: A scientist does not elevate a hypothesis to conclusion status until he has proof

That’s what I’m looking for, the proof, or better described as supporting data, either way. So far it has just been warnings from the ADA. And without the data to back it up, all we have is their logic. But why not use their logic and say that consumers need to be protected from the dealers as well, and we need yet another middle-man in there. And so on. Where does this end? What would be considered “reasonable”. I know the ADA’s answer, but how can they justify it when their own logic states otherwise?

With today’s information technology, dealers seem very archaic. People think EV’s are a disruptive technology, but they really have nothing on the internet.

30

+1

stuart22 Says

Mar 13th, 2014 (11:50 am)

I too think manufacturers should be able to sell directly, but it is wrong and unfair to allow one manufacturer to get a pass while all others are stuck obeying the law no matter how archaic it might be. As much as I admire Tesla for the American success story they are, a spoiled brat attitude seems to be growing out of their run of successes; an air of untouchable superiority which the worst of their followers use to cross the line into nastiness. Maybe it’s time for them to be brought down to earth and play fair.

Don’t break the law, get it changed.

31

+1

`Noel Park Says

Mar 13th, 2014 (11:51 am)

ronr64: But none the less you don’t break the law because it is old and out dated or because you don’t agree with it. Tesla needs to work state by state to change these laws, get legislated exemptions, or create their own franchise dealerships that satisfy the current laws.

#19

That’s the bottom line, right there. +1

Elon can send out tweets ’til the cows come home or hold his breath until he turns purple, but the that’s the bottom line. Welcome to the real world, Mr. Musk.

kdawg: That’s what I’m looking for, the proof, or better described as supporting data, either way.

There are many more variables to consider than I have time to get into. I’m mindful of factors that go beyond ADA arguments even, but I don’t have time to write that book.

Have to be doing other stuff at the moment.

I’d say keep researching with an open mind.

33

+2

`Noel Park Says

Mar 13th, 2014 (11:55 am)

stuart22:
I too think manufacturers should be able to sell directly, but it is wrong and unfair to allow one manufacturer to get a pass while all others are stuck obeying the law no matter how archaic it might be.As much as I admire Tesla for the American success story they are, a spoiled brat attitude seems to be growing out of their run of successes; an air of untouchable superiority which the worst of their followers use to cross the line into nastiness.Maybe it’s time for them to be brought down to earth and play fair.

Don’t break the law, get it changed.

#30

Same answer. +1

34

+3

`Noel Park Says

Mar 13th, 2014 (11:57 am)

“Tesla Schmesla”, LOL?

With apologies to Kojac/Telly Savalas,

“Who loves ya, baby?”

35

+2

`Noel Park Says

Mar 13th, 2014 (12:07 pm)

DonC: I am not a fan of Tesla and my opinion is that Elon Musk is a psychopath.

#22

Well I don’t know if I’d go as far as “psycopath” but, in case you hadn’t noticed, he’s not my favorite person, LOL.

With apologies to whoever it was who directed me to the correct quotation,

“Pride goeth before destruction, and an haughty spirit before a fall”

Proverbs 16:18

I actually keep it written on a slip of paper taped to the wall next to my desk now.

“Appleton, an attorney, in turn said it was “the pot calling the kettle black” to accuse anyone of backroom dealing.”

A bunch of crooked politicians denying a backroom deal……lol

“Tesla operate in an open and notorious unlawful manner”

The current model is notorious for pissing off and making consumers hate the buying process of 80% of it’s customers and the other 20% are the ones that like to haggle and ~Think~ they negotiated the best deal.

Ever since the automobile was made accessible to the masses, car dealerships have been special places where desires, sweaty palms, and that new-car smell are distilled into an intoxicating elixir of freedom and ownership. From Art Deco showrooms of the ’30s to modern glass-walled superstores, this nostalgic road trip revisits the architecture, marketing, and business practices that have become inextricably associated with auto retailers.

And here’s a paper supporting OEM’s right to sell direct based on economics.
(and from 2009, pre-Tesla Model S too)

Economic Effects of State Bans on Direct
Manufacturer Sales to Car Buyers

by

Gerald R. Bodisch*
EAG 09-1 CA May 2009

Abstract

State franchise laws prohibit auto manufacturers from making sales directly to consumers. This paper advocates eliminating state bans on direct manufacturer sales in order to provide automakers with an opportunity to reduce inventories and distribution costs by better matching production with consumer preferences.

39

RANDY Says

Mar 13th, 2014 (12:15 pm)

No problem Tesla
Just pass over NJ jersey like a dirty shirt.
People will drive to bordering states to buy and pay their sales taxes in other states.
NJ will wise up when they start losing money and forget about the greedy dealer network they are protecting.

40

+1

Kent Says

Mar 13th, 2014 (12:15 pm)

Nelson:
It’s a dark day in U.S. History when a law is enacted that prohibits a citizen from purchasing a product, which causes no physical harm to that person or others, due to its method of distribution.Such Laws go against the principles of our founding fathers who valued FREEDOM above all.

As a lifelong Californian, that’s how I feel about our ridiculous gun laws (I hope I didn’t just start another off-topic political diatribe).

DonC: That’s a canard that no thinking person would buy. The safety standards are all federal. What safety standard would a Model S not comply with? Simple. There isn’t one.

Please understand I am not advocating for the dealership position, just trying to say what they are saying.

I don’t think you read me as I intended.

Of course Tesla would comply with federal standards in manufactured products. No one is trying to pass off that “canard.”

ADAs do say the broad network of dealers make warranty recalls simpler for mass production. So far Tesla is virtually a boutique maker.

It wants to build mass volume. If a recall happened then, ADAs say it would be less prepared and geographically remote from many customers living in outlying regions.

Tesla puts its stores where the demographic money is at this point. Dealers see it trying to be like a big box focusing on high population areas, not 70 miles into the rural areas.

ADAs may have other points on this question besides. Again, I am not their advocate.

DonC:
Jeff Cobb: Dealers are seriously concerned that this is a slippery slope, and that is why they are all fired up, based on their experience and insights being in the business.

You can’t possibly believe this. Dealers are all fired up because they see a threat to their government created and protected monopolies. They don’t give a rodent about consumers.

You say I can’t possibly believe this? You are not reading me closely enough. Of course self interest is involved. It’s involved on both sides, and the question is who has the more noble way?

Read the Texas arguments, if you want. He makes assertions about checks and balances in place in an admittedly imperfect franchise system.

Will Tesla’s model bring unforeseen consequences?

Who knows?

Cordially, from Switzerland,

Jeff

43

+2

jim seko Says

Mar 13th, 2014 (12:35 pm)

Tesla can sell cars in China but sales are banned in three US states. The irony meter is off the scale but there is an upside to this story and it is sweet.

Elon Musk and Tesla are masters of free publicity. They spend zero dollars on advertising. When dealers fight Tesla it results in free publicity for Tesla. The dealers cannot win in the court of public opinion so I hope dealers keep fighting Tesla. This latest dispute has Chris Christie involved. Christie’s involvement helped this story go viral. All the major news outlets are covering this story. A google news search shows hundreds of hits for “Tesla New Jersey” Viral FREE advertising is good for Tesla and bad for auto dealers. Keep it up, auto dealers!

On May 4, 2011, Governor Christie signed A-3722 into law as P.L. 2011, c.66. The new law
took effect on May 4, 2011. Attached is a copy of the law for your information.

The law revises the New Jersey “Franchise Practices Act,” N.J.S.A. 56:10-1, et seq., which,
in part, defines the relationship and responsibilities between motor vehicle franchisors
(manufacturers) and franchisees (dealers). According to the sponsors, this law is meant to protect
New Jersey new car dealers from recent business practices in the auto industry that have allegedly
established an unequal bargaining position between dealers and manufacturers, prevent the
economic dislocation of additional New Jersey car dealerships and their employees, and protect
consumers.

47

Steve Martin Says

Mar 13th, 2014 (1:11 pm)

Excellent article!

48

+3

Nelson Says

Mar 13th, 2014 (1:12 pm)

Jeff Cobb: It wants to build mass volume. If a recall happened then, ADAs say it would be less prepared and geographically remote from many customers living in outlying regions.
Tesla puts its stores where the demographic money is at this point. Dealers see it trying to be like a big box focusing on high population areas, not 70 miles into the rural areas.

It is my experience that “New Car Dealers” in remote rural areas are the exception not the rule.
There are many more small towns that don’t have a “New Car Dealer” than those that do. I would love ADA to prove me wrong. In fact the not so rural NJ town I live in only has a Buick & Honda dealer. No Toyota, Ford, Nissan……

NPNS! SBF!
Volt#671

49

+1

`Noel Park Says

Mar 13th, 2014 (1:36 pm)

Schmeltz: You must be racking up the royalties by now Noel.Don’t forget us little people when you’re famous!

#41

LOL! +1

Of course the controversy continues over the spelling, although I’m very happy to see that Jeff has come around to my way of thinking on that subject. Still, many prefer the alternative spelling,

“Tesla Schmeltzla”

50

stilcrazee Says

Mar 13th, 2014 (2:25 pm)

Good ole boy network at it’s best.

At a minimum and on the surface one could be led to believe that allowing Tesla

(or any manufacturer for that matter..hey don’t most all major retailers, Walmart, Costco, Sears to name just a few non franchise companies have their own private label brand that they sell direct? I know it is a different type of business but the ruling is pretty much the same no?)

to sell direct could only help New Jersey or any other state’s tax coffers. Hard to believe that the elected “officials” are thumbing their collective noses at tax dollars.

51

+1

arne-nl Says

Mar 13th, 2014 (2:40 pm)

Schmeltz:
I’ve said before and still stand by it…is this fight that Tesla is in worth it?

First of all, the middlemen want a piece of the cake. A rather large one is my guess.

If you hear the stories about dealers totally ignorant of EV’s and even opposed to EV’s, how much of a chance do you think Tesla has getting their cars sold?

The reason why Tesla is doing this is totally obvious.

Maybe the US car dealers might sponsor an excursion to Europe to see how our dealers survive without special protection.

52

+2

vdiv Says

Mar 13th, 2014 (3:15 pm)

GM has a bipolar disorder or worse yet, is a hypocrite. The GM that I like did the right thing and gave us the Volt. The GM that I hoped had gone away in 2009 wrote a testimony to the Ohio state senate pandering to the dealership cartels, unwilling to stand up and embrace the new and the necessary, unable to be a leader and to build the electric car that Tesla has. That is the GM that I dislike and am not willing to further support.

53

+1

bobchr Says

Mar 13th, 2014 (3:23 pm)

A new business model is needed. These law are either outdated or never really accomplished what they intended to in the first place. At no time do I see how dealership franchise arrangement actually protect consumers. I’ve had more problems with bad dealerships and worse service managers than I’ve ever had with direct manufacturer issues. In this modern day of high speed internet availability and the make up of electric cars, it could easily be argued that Electric cars are not automobiles but mobile computing devices that allow human and material conveyance. Traditional franchise dealerships should not be allowed to impede interstate commerce and do little except add costs to both the OEM and consumers. They are not protecting anything except their own self interest.

54

+1

stuart22 Says

Mar 13th, 2014 (3:29 pm)

vdiv:
GM has a bipolar disorder or worse yet, is a hypocrite.The GM that I like did the right thing and gave us the Volt.The GM that I hoped had gone away in 2009 wrote a testimony to the Ohio state senate pandering to the dealership cartels, unwilling to stand up and embrace the new and the necessary, unable to be a leader and to build the electric car that Tesla has.That is the GM that I dislike and am not willing to further support.

Ding Ding!

Somebody had to invoke Godwin’s Law here, and VDIV gets the honor. GM, Nazis, what’s the difference…..

I missed this the first time reading through. At the Geneva Auto Show I presume?
Lucky dog. I hear there are lots of electrics there.

56

+3

Nelson Says

Mar 13th, 2014 (3:52 pm)

“I’m a lawyer I can tell you there a hundred different ways they can challenge the law,” said Appleton. “None of them is going to do them much good” because the law is there to promote competition and “ensure that consumers get the full and fair treatment when it comes to warranty and safety recall service.”

In the above statement was Appleton trying to transfer credit for safety recall service from the NHTSA to the ADA??? lol!!!

Can anyone give me FIVE top (most compelling) reasons why Tesla should be permitted to operate factory direct and why the franchise system is bad for consumers?

You’ll be glad you did because I’m working on something. Tesla has said a bunch of things for the record in defense of its model.

This it said in the blog post about NJ the other day:

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

###

Now … can anyone give me five BEST reasons why Tesla should be free to do what it wants and why the CONSUMER will benefit or ECONOMY will benefit?

“According to The Telegraph report on Dr. Heinz-Jakob Neusser, Volkswagen board member responsible for development, we should expect more energy in future battery packs from VW, which is in line with our previous report on 50% more range by 2015 and 300% more range by 2020.

The Telegraph story, which was found first by our readers in comments (thanks!!!), seems to be more complete because its includes some additional numbers.

Volkswagen is testing lithium-ion cells from its current supplier Sanyo (Sanyo belongs to Panasonic), which enables the automaker to build 37 kWh battery packs. This is ~50% more than in the e-Golf.

Separately, Volkswagen is preparing 80 kWh units, but this is internal VW development: “an 80kWh unit is under development using our own technology. It would provide between three and four times the battery power in a given package.”

We don’t know exactly which type of battery chemistry Volkswagen is using, but perhaps its solid-state or even lithium-air.” *

Any attempt to paint this in any way other than existing businesses lobbying to protect their business model and stifle competition through politics is disingenuous and laughable. There’s simply no other reason for this decision.

64

+2

CaptJackSparrow Says

Mar 13th, 2014 (4:52 pm)

Jeff Cobb: Can anyone give me FIVE top (most compelling) reasons why Tesla should be permitted to operate factory direct and why the franchise system is bad for consumers?

1: We all can see what the MSRP of current cars are, high, but the dealers cost seems less, more like smoke & mirrors, so I don’t believe the MSRP. This new model, we know the real MSRP, what will the Dealers price be? If it’s more, there is NO advantage for the customer! It won’t be less because greedy NADA, they won’t do anything for the consumers.

2: Dealer networks demand, more like “strong arm” consumers only purchase through them. Consumers need the freedom and ability to “choose” the method of purchase for their product.

3: All dealerships in comparison always have different prices. One Jack Hole dealer selling a car will always have a different price from the other Crap Brain dealer down the street leaving a buyer feeling he got “Bent Over” because another dealer sold the same car to Jane Stole for less.

4: Service & Repair: Same as # 3. Just Bend over cuz here comes Lex Steele!

5: Just because “It’s always been that way” doesn’t mean Sh&*! The Earth used to be flat! Cars used to only use OPEC Juice! Evolve or Die! It’s always been a crappy experience so let’s keep it crappy?!?!?!?

Can anyone give me FIVE top (most compelling) reasons why Tesla should be permitted to operate factory direct and why the franchise system is bad for consumers?

I see this as backwards. The law is there to prevent manufacturers from selling directly to customers. The question should be, “Show me data that justifies the law.” There are many, many laws on the books that are not enforced. I still haven’t seen data justifying this law. There must be places where cars are sold directly to consumers. It should be relatively easy to show how horrible things are there for consumers, right?

It’s not backwards, I am talking about philosophically on a national level. Put it any way you wish.

Why is it better to let Tesla go free?

It would be assumed that the laws would need to be changed where they forbid Tesla.

I’m looking for a list. Work with me here.

70

`Noel Park Says

Mar 13th, 2014 (5:40 pm)

Jeff Cobb: Now … can anyone give me five BEST reasons why Tesla should be free to do what it wants and why the CONSUMER will benefit or ECONOMY will benefit?

#58

Nope, not me.

Just to be clear, I’m from Switzerland as well. As wise bloggers above have said, if you don’t like the law, get to work and try to find out a way to change it. Which is exactly what Tesla is trying to do IMHO. The problem is that the ADAs have as much or more of an investment in maintaining the status quo as Tesla does in changing it, so the lobbying and PR battle continues.

Napoleon supposedly said that, “God is on the side of the big battalions”. IMHO he’s also on the side of the big lobbying, PR and law firms. $$$talk and BS walks.

71

`Noel Park Says

Mar 13th, 2014 (5:45 pm)

nasaman: We don’t know exactly which type of battery chemistry Volkswagen is using, but perhaps its solid-state or even lithium-air.”

#59

In addition to being from Switzerland, I’m also from Missouri, LOL. If I had $1 for every gee-whiz battery claim that’s been reported here over the last 4 years I could finally retire.
It reminds me of kdawg’s famous saying about fuel cells – “Always 10 years in the future”.

Jeff Cobb: It’s not backwards, I am talking about philosophically on a national level. Put it any way you wish.

Why is it better to let Tesla go free?

It would be assumed that the laws would need to be changed where they forbid Tesla.

I’m looking for a list. Work with me here.

Just to be clear, I wasn’t saying you had it backwards, I said it’s backwards from my perspective. I think it is reasonable to ask for data to support the existence of a law. So far I have seen none. Again, many laws are not enforced. This one is special in that there are people (dealers) with vested interests in having it enforced. I have not seen any data showing that consumers benefit from enforcing these laws (and that data should be easy to come by, suggesting strongly that the data does not support the law). Is it unreasonable to ask for data? If so, why? Don’t force me to give examples of dumb laws that are not enforced, that will just lead things way off track. Also, I predict Tesla will not give in to franchise laws. I personally think it is not a psychopathic decision as some have suggested. I think they won’t give in because it would be a bad business decision. They are selling all the cars they can produce and probably will be for at least a few more years. I’m willing to be convinced franchise laws are good, just show me the data (I’m also from MO).

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radx4g Says

Mar 13th, 2014 (8:36 pm)

I’m surprised by a lot of the responses here. I understand that car dealerships are terrible and operate by preying on uneducated consumers (and by performing expensive and unnecessary service). But having many dealerships in a market creates competition between dealers, which can be leveraged to get better deals for knowledgeable customers. Without franchise dealerships, you would be stuck paying MSRP for your car.

I frequently see people on the forums happy with their latest deal from Keyes or other high volume dealers. I was able to buy my Volt for nearly $5000 under MSRP. Without franchise dealerships, you would not be able to do this. The MSRPs for such vehicles are also not lower (see Saturn). Yes, fixed price dealers are able to offer no sales pressure and are extremely friendly and professional. That’s because they’re making a nice profit on every deal. The only reason Tesla can do this is because they have a relatively unique high-demand product. It’s unclear if they can continue in this fashion for much longer.

I seriously wonder if the people expressing support for direct sales here would be happy paying MSRP for their car. Yes, the Volt is a great car, but I wouldn’t be happier spending thousands of dollars more on it even if it meant that the dealership had a fancy showroom and better staff.

1. As a point of individual freedom. It is not so much whether or not Tesla should be allowed to direct sell but rather that I should be allowed to direct buy. Why should I be told, in a free country mind you, that I cannot go to the phone/computer and buy a legal product from someone who makes it?

2. I don’t expect dealerships to disappear, but many of the reasons for requiring car sales through locally owned dealerships are no longer valid. One will still need a place for service, warranty work, and delivery and… sales. The only difference is one of ownership. With the huge dealership companies (Hendricks for example) the whole idea of local ownership is long out the window anyways. Between the internet, NHTSA, next day shipping etc. the idea that you have to rely on your dealer for parts or as a go between for info or safety/warranty data that the manufacturer would keep from you is invalid. I could go on but in my opinion most of the ideas for creating locally owned dealerships, which was born from the day when there were hundreds of manufacturers with no ability to keep cars running, are gone.

3. Distribution. Direct buying would make it much easier to get the vehicle that a consumer wanted. Back in 1994 my wife (was girlfriend then…) wanted to buy a new convertible. She wanted to look at a new Camaro because they were just coming out with convertibles again. None to be found here in Minnesota. Dealers told us they were not even out yet. She ended up buying a Cutlass convertible instead. We took a trip down south to Texas and the dealers there had rows of them… Liars. Today with the internet of course we could have more easily found what we wanted. The point still stands though. For the most part you have 3 choices. Buy what is on the lot, order one and wait or try and get your dealer to trade with another dealer – not always easy for in demand products. I guess a 4th choice would be travel however far it takes to find what you want.

4. Competition. I have seen others suggest competition would be eliminated, I disagree. Today you will be shown some sky high retail price that no one pays. Then will come the various incentives, trade-ins etc. After that there is some dickering and they write down a price. Then you go to another dealer and do it all again. Buying a car at the best price can take days and you better have the skill. Would that still take place with direct sales? Perhaps but I don’t think so. I think someone in New Jersey will be online telling someone in Oregon exactly what they paid from the same seller so they will both expect the same deal. I also think the gap between MSRP and actual price paid will decrease. Currently everyone knows MSRP is BS so there is not real competition on MSRP. When it becomes the actual selling price? I think the competition on price from Mfg. will heat up.

5. Bar to entry. It is too tough already for a new car manufacturer to begin in the US. Currently the easiest way is to start in another country, or buy an existing company, and then start importing. Is that anyway to encourage business creation? Now I realize Tesla has big plans but they are not there yet and won’t be for some time. I would suggest that a new manufacturer or a low quantity manufacturer have a bunch of concessions offered them. In particular the level of certifications they need regarding crash testing, MPG, EPA and dealership requirements, perhaps others as well. I am not saying no requirements for testing just a lessor amount. Not being my field I couldn’t even offer legitimate examples, just the concept. Consumers could easily be warned that the vehicle has not been tested and may or may not conform and of course manufacturers could opt in earlier if they wished. This would allow many new car companies to form in the US.

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Koz Says

Mar 13th, 2014 (11:31 pm)

Of course the dealers want everyone to believe the provide an indispensable service that serves the public good. Most given by NJ CAR’s make good sound bites but contradict themselves and are easily marginalized with basic reasoning.

The one argument that is a little more complicated to deconstruct is that claiming superior warranty service from dealers versus direct from the factory due to the purer motivation for the dealers. There is truth to this idea but that does not speak to safety recall work. The non-safety related, quality defect warranty is another matter and the manufacturer is motivated on a cost basis to minimize this service.

The argument falls apart when you consider all business motivations and all costs born by the consumer. Business have plenty of opportunities to save costs by reducing product and service quality besides warranty repairs. This cost is no different than any other. The manufacture is much better suited to make value judgements about what constitutes a warranty repair vs the dealer who bears none of those costs but can participate in the goodwill benefit from performing the repair. On a motivational level the dealer is much more skewed to perform unwarranted warranty repairs and ultimately this added cost burden is born by the consumer. With the entity that bears the cost of repair the same as the one that benefits from the goodwill of performing the repair, the net result is a fairer and more cost effective solution.

Can anyone give me FIVE top (most compelling) reasons why Tesla should be permitted to operate factory direct and why the franchise system is bad for consumers?

You’ll be glad you did because I’m working on something. Tesla has said a bunch of things for the record in defense of its model.

This it said in the blog post about NJ the other day:

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

###

Now … can anyone give me five BEST reasons why Tesla should be free to do what it wants and why the CONSUMER will benefit or ECONOMY will benefit?

Both systems are fine. It is not an either or scenario as the dealer associations and some bought or small minded politicians would have you believe. Rather, it should be an “and” scenario. Only antiquated and/or IMO misinterpreted laws create the “or” dynamic.

The only values dealers truly add that I have come up with so far are: choice via local inventory, speed of acquisition via local inventory, and access via more locations. Anyone thinking all the additional people, bricks, and inventory somehow lowers the total costs and thus selling price to the consumer is sorely mistaken.

There are many more advantages to the direct sales model but only one some simple concepts really matter: the constitution, the bill of rights, and the principals they embody within the framework of protecting the public good. None of that speaks to the blind adherence to regulations or protections for a legacy sales model.

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Steve-o Says

Mar 14th, 2014 (10:06 am)

radx4g: Without franchise dealerships, you would be stuck paying MSRP for your car.

No, you wouldn’t be paying MSRP, you would be paying invoice. MSRP is the marked up price that allows the dealers to take their part of your money. And how much haggling do the dealers do with the manufacturer to get the price down and represent the consumers’ best interests?

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I once again find myself personally spending a lot of time both reading
and leaving comments. But so what, it was still worth it!